What needs to change

Small amount credit contract laws are currently under review. Here’s some of what we told the reviewers:

Cap the cost of small amount (up to $2,000) and medium amount (up to $5,000) loans at 48% per annum, inclusive of all fees and finance charges, the same level that is able to be charged for loans above $5,000

Increase funding for ASIC to take compliance and enforcement action, and strengthen ASIC’s licensing regime

Require lenders to provide more information to the regulator, including the number of loans advanced, the size of loan books, and the level of defaults

Prohibit lenders providing loans where the applicant has an existing loan, or where they have had more than 2 loans in a 90 day period

Limit the number of loans a borrower can have in a twelve month period to two

Require all lenders to disclose an annual percentage rate, including prominently in advertising

Limit to 10% the amount of fortnightly income that can be directed to loan repayments for all Centrelink recipients and other low-income borrowers

Establish a national database of loans to facilitate enforcement with restrictions on repeat borrowing

Establish a general anti-avoidance provision to enable the regulator to better attack business models and products that avoid the law

Abolish the distinction between consumer leases and other loans, so that all credit arrangements are subject to a comprehensive 48% cost cap